The state of the US economy is one where the price level has decreased from 110 to 120. Manufacturers are finding that their inventories are increasing. Foreign countries are finding that the exchange rate of the US dollar is down. Americans are substituting imported goods where they can. The claims for unemployment are at an all time high and consumers are postponing credit purchases.
1. Draw and label graph that best describes the situation above.
2. If you were president Bush what would you do in response to the situation described above?
3. If you were the head of the FED, what would you do in response to the situation described above?
Fiscal stimulus policy generally includes lowering taxes or increasing government spending. Monetary stimulus policy is to increase the money supply.
1 answer